An Inverted U: Testing for a Swedish Municipal Environmental Kuznets Curve with an Inequality Perspective

Sammanfattning: The Environmental Kuznets Curve (EKC) hypothesis suggests a relationship between environmental degradation and economic development where degradation initially increases with economic development until a certain point where additional development is associated with decreasing degradation. In the literature, the effect of economic inequality on this relationship has been studied from both theoretical and empirical viewpoints. In this thesis the EKC and the role of inequality are investigated in the 290 Swedish municipalities in the period 2008-2017. Panel data, all logarithmic, for five different types of emissions, mean earned income, squared mean income, and Gini coefficients are applied to a set of fixed effects models. We find a significant EKC-type relationship for GHGs while not considering the impact of inequality. We find mixed evidence regarding the impact of income inequality; thus, we are cautious drawing strict conclusions from its predicted effects. For robustness purposes, similar regressions are done while instead looking at counties. These regressions display similarly shaped relationships between environmental degradation and economic development, yet with no statistical significance.